A New, Transparent Argentina?
New Proposals on Transparency, Corruption and Criminal Procedures in Argentina: What Companies Should Know About the Proposals and the Challenges That Remain
Challenges for Argentina’s Newly Elected President, Mauricio Macri
In December 2015, Mauricio Macri donned the blue-and-white presidential sash of Argentina, following his hard-fought and surprising presidential victory.
He immediately proceeded with a flurry of reforms by promptly slashing export taxes, removing capital controls and lifting a number of import restrictions. He also negotiated a deal with holdout creditors that allowed Argentina to return to the capital markets, potentially ushering in a wave of foreign investment. His bold departure from the previous administration continued when he received President Obama for an official state visit in April. In short, President Macri quickly distanced himself from the policies of his recent predecessors and lifted expectations for his administration, particularly within the business community.
But challenges remain for businesses considering investing in Argentina, and those already operating in country. Significant bureaucratic hurdles have stifled foreign investment in recent years, resulting in foreign direct investment (FDI) falling precipitously since 2012 under increasingly oppressive governmental controls. Many companies with existing operations continued their businesses instead of departing, but they described their operations as simply “hunkering down.”
Barriers even existed for companies that attempted to exit Argentina. The repatriation of profits was strictly controlled, and frequently denied by the Central Bank. Companies were forced to reinvest profits locally, given these capital controls, rather than send remittances abroad or issue dividends to parent companies or shareholders outside of Argentina. Scarcity of U.S. dollars also hindered the ability to import standard goods to run a business. Approvals of imports often required face-to-face meetings with government officials, including at the highest levels of the Secretary of Commerce. From a compliance perspective, these distortions in the economy resulted in intense and repeated interactions with government officials, creating an intense intimacy between government and businesses in Argentina.